Last week, the S&P 500 rallied to its best level in more than five years. The Value Line index hit another new all-time high. And, albeit by inches, the Dow Jones Industrial Average rallied to a new intermediate closing high to “confirm” movement in the Dow Transportation Average which, under the venerable Dow Theory, underscores a primary bull trend in the market. The problem with the latter is that Dow Theory signals are a bit “spongy” and tend to be subject to interpretation. Some have said that Dow Theory confirmed on the upside a month ago. Others disagree. Current reversals to positive have apparently changed a Sell signal generated last May. Others differ and say the Sell came in September. No, wait...

At any rate, the market rallied some last week. All cycles including Minor, Intermediate, and Major remain positive with tendencies toward “Overbought.”. At the same time, Cumulative Volume confirmed the new intermediate high in the S&P, but not in the S&P Emini futures contract. Nor in the Dow 30, or in the NASDAQ Composite that has been lagging anyway. There’s no volume reported for the Value Line index, so we can’t comment on that.

Market Overview – What We Know:

Major indexes recorded small gains again last week with Value Line Index hitting new, all-time closing high and S&P 500 to best level since late December 2007. NASDAQ Composite index continues to lag.

All cycles, including Minor, Intermediate, and Major, remain positive.

Daily MAAD bettered December 20 short-term resistance high last Friday, but remains well below more important intermediate resistance made last March 20. Daily MAAD Ratio is toward “Neutral” at 1.07 with Weekly MAAD Ratio moderately “Overbought” at 1.42.

Daily CPFL rallied to another short-term high last week, but has yet to overcome resistance created last September. Daily CPFL Ratio was moderately “Overbought” at 1.63 while the Weekly Ratio was moderately overheated at 1.25.

Cumulative Volume (CV) confirmed S&P 500 strength last week to a new intermediate high, but did not confirm gains in S&P 500 Emini, or in Dow 30 or NASDAQ Composite.

The Daily Most Actives Advance/Decline Line (MAAD) eked out a slightly higher high by rallying above its December 20 short-term peak by a few notches. But the indicator also remains well below intermediate resistance put in place back on March 20, 2012. Our Call/Put Dollar Value Flow Line hit a new short-term high last week, but continues to remain below intermediate resistance made back in September.

Does all of this sound familiar in that the market makes selective new highs, depending on the cycle, while an array of indicators continue to flirt with negative divergences. If it does, welcome to the long-term endgame that, unfortunately, can continue for months as prices work higher with less and less underlying indicator corroboration. Although a hand might pop up with the comment to suggest that the flip to positive by the Dow Theory is a “very good sign,” we can only suggest that in respect to Dow Theory, that indicator is notoriously late and has the flexibility of a battleship in a bathtub.

In spite of apparent bullish “tendencies” since November lows, uptrend initiated in March 2009 is mature and could very likely be much closer to an end point than not. In fact, upside “Measured move” targets calculated on a variety of cycle points suggest that on average S&P, Dow 30, NASDAQ, and VAY could be within 10% of ultimate highs in this bull trend.

On time scale, S&P, Dow, and NASDAQ appear to have time left to achieve goals while VAY looks overextended.

So long as pricing and indicators are not in synch on upside as they were from March 2009 until May 2011, lingering long-term doubts will persist, and we will continue to wonder how much longer this market will be able to shake off unfavorable indicator divergences.